‘In, on and with’: Building the modern firm

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With the future rushing at them at a furious pace, accounting firms need to evolve to a new, more modern model, according to well-known industry consultant Darren Root.

At a Rootworks Partner Retreat in late June, Root warned attendees that while firms have had to adjust to being “next-generation” practices that balance work and life, this new imperative goes beyond that: “There’s more to this than creating a life outside your practice,” he said. “Today, it’s all about being modern. What does being ‘modern’ look like, and how do we go about being modern?”

“Are we going to be cranking out tax returns and financial statements and asking people to pick them up in five years? How are we going to be modern?” he asked. “We’ve got to figure out how we get out in front of this upheaval.”

Much of the upheaval is being driven by technology, Root noted, but it also involves changes in demographics, business models, and client demand; with all that in mind, he suggested that accountants model themselves on what he describes as “the Modern Firm” -- “a strategy that develops and leverages the competencies of you and your staff to evolve your firm in three essential ways: working on your firm, working in the firm, and working with your customers.”

1. Culture -- ‘Working on’

“It’s culture that attracts young accountants,” Root explained. “We all bought into working from 7 in the morning to 7 at night. This is about creating the firm we would all have liked to go work for 30 years ago.”

Forward-thinking firms have already begun to make this shift, driven by staff shortages and worries about succession planning -- Root himself has been urging firms to become “Next-Generation Firms” that embrace much more employee-friendly policies and attitutudes -- but that is no longer enough to keep firms ahead of change. That’s where the other two elements of the Modern Firm strategy come into play.

2. Business model -- ‘Working in’

New technologies have both commoditized traditional accounting services, and opened the door up to newer, more valuable ones that firms should pursue. That will mean significant adjustments to their business model, Root explained: “We have to think differently about what our customers want from us, and then we need to figure out what technology will help them.”

“We’re sitting here with a group of clients who want something from us, but we don’t have the time for them. Why can’t I ask my tax software, ‘Who didn’t maximize their 401(k) contributions last year?’ so I can send them a reminder about it?” he asked. “Technology should allow us to leverage time in a different way – we have to be smart enough to use that time better. In the past, if we had more time, we cranked out more returns. If we don’t move off of what we’re doing right now – which is cranking things out – we’re going to lose out.”

Adapting a firm’s model -- and its clients -- to new technologies will be critical. “When we think about a modern firm, we need to start thinking about the technologies that we need to implement inside our practice to get us to a modern firm,” Root said. “There are customers who would be on DOS today if they could. ... We as firms have to become education companies. We have to figure out how to educate people about where they should go. What should I be coaching my clients to use?”

3. Client interactions -- ‘Working with’

Finally, Root said that the Modern Firm needs to spend much more time improving its customers’ experience.

“How many things have we made so complicated for our customers?” he asked. “Sit down with your staff and identify all the touchpoints with your customers, and reduce the friction. The majority of them are simple – it’s just thinking about how you can do them better.”

Requiring clients to pick up hard copies of tax returns is a good example of friction, Root noted, as are client portals with passwords that clients forget every year (though security, he pointed out, is a major issue for the Modern Firm as well).

From data collection to deliverables, “It’s about thinking about every single touchpoint with have with customers, and how to reduce friction at those touchpoints,” Root explained.

The firms that do, he promised, will reap the benefits: “If we start thinking about the friction we create in our practices, and how we can remove it, we’ll be ahead, because the rest of the profession isn’t thinking about friction.”

The same holds true for the whole process of becoming a Modern Firm. “‘How do I make my firm better? Where do I start?’” he asked. “It is unsettling to a lot of us, but it’s really enticing when you think about it.”

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